The Best Performing Fund Families

They say good genes run in families, and when it comes to Mutual Fund
Families, the same can be said. It
seems that there are a number of fund families within which the majority of
funds have above average returns.

While it is impossible to say that one fund family is better than
another, the following research may help to explain why we often favour
fund families like Trimark, Templeton, Fidelity and Mackenzie. It
also explains why they are some of the largest fund families in Canada.

Below, you will find research on which fund families have below average, average
or above average funds. You can quickly conclude that if you hold
Trimark or Templeton funds, they are likely to be above average
funds. But note that what really matters is the performance of the
particular fund you are holding. A relatively new fund company worth
watching is Northwest Funds. Their name comes from the concept that
you want your funds to be in the Northwest quadrant, eg. lower
risk, higher return. A fund family with a high number of above
average funds is an advantage to you, because you could switch to any
number of other good performing funds in that family at no charge.

Just because you hold funds from a group that is lower on the list,
does not mean you should be concerned. For example, Synergy
Canadian Style management fund continues to be on our recommended
list, and in fact, half of the funds from Synergy and Strategic Nova
are average performers (eg. three stars).

Bellcharts
Morningstar Rankings

Fund
Family

*

**

***

****

*****

%
Average Performers in Family

Ranked
Below
Avg

Ranked
Above
Avg

Above
Avg as % Of Total

Total #
Average or Above Avg

Trimark

0

0

2

10

7

11%

0

:

17

89%

100%

Templeton

0

1

4

11

1

24%

1

:

12

71%

94%

Northwest

0

2

0

4

0

0%

2

:

4

67%

67%

Fidelity

0

1

5

6

5

29%

1

:

11

65%

94%

Clarington

1

1

2

4

3

18%

2

:

7

64%

82%

Mackenzie

3

7

18

16

10

33%

10

:

26

48%

81%

GGOF

1

10

8

9

1

28%

11

:

10

34%

62%

AGF

3

9

11

8

4

31%

12

:

12

34%

66%

Maxxum

0

1

5

2

1

56%

1

:

3

33%

89%

CI

5

24

22

14

10

29%

29

:

24

32%

61%

Scotia

1

5

7

5

1

37%

6

:

6

32%

68%

Talvest

1

5

7

6

0

37%

6

:

6

32%

68%

Royal

0

4

16

6

3

55%

4

:

9

31%

86%

Elliott & Page

1

5

3

2

2

23%

6

:

4

31%

54%

TD

3

9

54

21

8

57%

12

:

29

31%

87%

Altamira

1

10

13

6

3

39%

11

:

9

27%

67%

Dynamic

3

7

15

7

0

47%

10

:

7

22%

69%

Spectrum

1

5

19

6

1

59%

6

:

7

22%

81%

AIC

7

11

10

5

2

29%

18

:

7

20%

49%

AIM

3

7

10

2

2

42%

10

:

4

17%

58%

BPI

0

1

4

1

0

67%

1

:

1

17%

83%

Ethical

1

3

3

1

0

38%

4

:

1

13%

50%

Synergy

0

3

4

1

0

50%

3

:

1

13%

63%

Strategic Nova

3

6

11

1

1

50%

9

:

2

9%

59%

Notes:

Fund
families are grouped by similar names (even though for example AIM
& Trimark are both owned by AMVESCAP)

Only
funds with 3 year rankings will have Bellcharts / Morningstar rankings

Based
on Feb 28, 2002 data, on the most popular funds available through
ScotiaMcLeod

We will continue to recommend funds based on a wide variety of
factors. These include the overall performance of the fund family,
the historical performance of the fund itself, whether managers have
recently joined or left the fund, the fund's risk profile, its tax
attributes, and how it is positioned to maximize future growth.

Survivor Bias

There is one factor to keep in mind when looking
at long term performance, which is known as survivor bias. Simply said the better performing funds are rarely eliminated. Very poor performing funds, will generally fail to attract new
assets and may then be closed or changed. And over time, when funds are merged within families, due to
redundancy, changes in management or other reasons, generally the fund
that is closed is the lower performing fund, and the fund that the assets
are consolidated into will remain, with its better track record.

An exception to this was the recent change to Global
Strategy Income Plus fund. It
was generally a 3 or 4 star performing fund on Bellcharts/Morningstar, but
was merged into the 2 star AGF Canadian Balanced fund.
(The AGF Canadian Balanced fund is the oldest fund in Canada, with
an inception date of 1931, which likely had something to do with which
fund record to keep.) However,
since that fund is now managed by a new Manager Christine Hughes, it
should only be judged by its 3 year performance which has been good.
See the links below for more information:

What To Do About Low Interest Rates

This last week (April 2002), the prime rate jumped 1/4%, the first such increase for
several years. However, short term rates remain at near 40 year lows.
It is interesting to note, though, that while longer term bond rates, eg. on 10
year bonds, are actually higher right now than they were four, three and
one years ago, they have basically sat within a
band between 5% and 6% for quite some time.

While rising long term rates can hurt the performance of
bond funds, or stripped
bonds, we see little evidence that long term rates will rise by any
significant amount, despite the increases in short rates that seem
inevitable.

One item to consider, is the real return on your bonds. That is,
the nominal rate less the inflation rate, or the real rate of growth of
your money and purchasing power. Over the last ten years there have
been real return bonds (RRBs) available. As shown, these currently
offer 3.5% real growth on your investment, and are available with terms up
to 20 years. If inflation stays at 2.5%, they yield 6%, but if
inflation goes back to 10% the RRBs would yield 13.5%. They are
possibly the lowest risk investments available in Canada.

So it is important to distinguish between short and long term
rates. A bond fund will ladder maturities
in their portfolio to take advantage of the higher rates on the longer
bonds. You can also have a laddered set of bonds
in your own investment portfolio, and as each bond comes due, it can be
rolled into a new, higher rate long term bond. Please contact us for
a review on the current yields of your bonds or bond funds.

AGF International Value Fund Update

As you may have read, the high profile manager
Charles Brandes has departed from AGF.

In late March, Brandes Investment Partners, one of
AGF's sub-advisors, terminated their relationship in favour of
establishing their own mutual fund company in Canada. Since 1994, Brandes has managed several funds for AGF, namely the
AGF International Value Fund, AGF RSP International Value Fund,
AGF
International Stock Class, and AGF Emerging Markets Value Fund. For the next few months, the funds will continue to be managed by
Brandes and subsequently a new manager will be appointed.

In light of these events, we have placed the AGF
International Value Fund and AGF International Stock Class Fund under review. We will continue to monitor the situation closely and will assess
our recommendations after a new manager has been identified and we have
had the opportunity to assess them and their capabilities. In the meantime, we are recommending that clients in these
funds continue to hold until they have appointed the new managers.

Here are some links with more information:
www.fundmonitor.com
Research Report
www.investmentexecutive.com
Industry News (Brandes departs from AGF)
www.investmentexecutive.com
Industry News (Brandes' own firm)

In other news, Mackenzie has made a move to end its
relationship with Scudder. The
decision was made partially due to the fact that there was excess
management and an overlap in some funds. Mackenzie began their relationship with Scudder when they merged
with Maxxum in October 2001. We
will keep you informed as to any new developments and will advise you of
any recommended changes if you are a holder of these funds.

Reviewing Trimark Commentary from March 2000

Earlier in this issue, we identified that Trimark is
one of the families with consistently good performing funds. However, this did not seem to be the case 2 years ago. In April of 2000, the internet bubble as it is now known, was at
its peak. Trimark's largest
value funds were looking like laggards next to the B2B and e-commerce
funds that were proliferating. Still
we published:

The "new" economic paradigm– How real is it?
With the byline: We recently have been receiving analysis that
suggests that technology stocks are overvalued. Here is a particularly
good article from Trimark.

Of course, a contrarian would be wise to look at the
unloved growth funds today, as these things do move in cycles. Or even better, holding a balance of growth and value type funds,
could be the wisest decision of all.

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